The bigger your money grows, the wiser it is to diversify where you keep it. In fact, anyone with seven-figure or higher income and savings should consider opening an offshore bank account, both for convenience’s sake – imagine traveling abroad and not having easy access to your money, for example – and for long-term security.
In fact, an offshore bank account could be one of the most effective defense strategies against aggressive litigators or any other interested party that might want to take possession of your assets.
But opening an offshore bank account isn’t as easy as you might think. In addition, opening the right kind of offshore bank account is just as important as opening one in the first place.
What is an Offshore Bank Account?
An offshore bank account is, in a nutshell, a bank account in a country or jurisdiction aside from your own. For example, if you live and work in the US, any bank account in Canada, Mexico, the Cayman Islands, New Zealand, or another planet would be "offshore."
Though the word evokes images of remote island banks and hundreds of miles of open ocean, offshore bank accounts are anywhere other than your home turf, plain and simple.
Therefore, offshore banking is banking that takes place between international companies, investment firms, credit unions, etc. While you can open an offshore bank account practically anywhere, a few places are very well-known for the idea, including:
- The Cayman Islands
- Isle of Man
- And more
On top of that, offshore banking is sometimes discussed like it’s a sneaky way to sequester money away for illegitimate purposes.
Nothing could be further from the truth! Anyone can take advantage of offshore banking to protect their estate and other assets from frivolous lawsuits and other potential dangers.
And, if you ever wish to create an offshore trust to protect your assets for the long term, having an offshore bank account will make that process easier when the time comes to transfer funds from outside the trust into the trust.
Bottom line: knowing how to open an offshore bank account is a valuable advantage no matter what step you’re at in your asset protection strategy.
Opening an Offshore Bank Account – Basic Steps
On paper, opening an offshore bank account might not seem all that complicated. Truth be told, the process of opening an offshore bank account is technically similar to opening any other bank account, with basic steps including:
- Get your personal and financial information together
- Provide any additional verification documents you may need
- Present all the information to the offshore bank of your choice and ask to open a bank account
- Pick a currency. This is the currency your funds will be held in
- Deposit money to your offshore bank account
- Voila, now you’ve opened and used an offshore bank account
Things to Prepare
As with opening a traditional or home territory bank account, you have to provide any good bank with several key documents. Depending on the bank you work with, this can include but might not be limited to:
- Your birth certificate
- Your Social Security card
- A driver’s license or identification card
- A copy of your passport
- Notarized copies of documents such as bank records
- Proof of source of funds, like business ownership or inheritance
- Financial reference documents from your current bank
In many cases, offshore banks ask for additional financial reference documents that prove you have a good relationship with your current banking partners. In most situations, that means providing between 6 and 12 months of bank statements.
Seem intrusive? It is to some extent, and it’s on purpose. Offshore banks want to make sure that they won’t get into any legal hot water by offering banking services to those seeking them out from other countries.
More broadly, many of the best offshore banks have a vested interest in learning as much as they can about their clients. It’s a key part of how mutually beneficial relationships – which drive the core elements of offshore banking, as detailed below – begin with new clients.
But is it Really That Easy?
No. It’s definitely not.
Let us rephrase: successfully setting up an offshore bank account is not as easy as simply approaching a bank outside your home country and asking for it.
True, you could set up an offshore bank account in this way. In fact, if you are based in the US, you could probably hop the border to Canada with your personal and financial documents in a briefcase and have a bank account set up in a matter of days, if not hours.
But that doesn't mean your offshore bank account will truly do what you need, including protecting your assets from potential attackers. To open an offshore bank account you can trust, rely on, and utilize to the maximum extent for years to come, you'll have to spend more time in the process and work with expert financial advisors.
“Offshore” vs. Offshore Banking – The Devil in the Details
There’s offshore banking, and then there’s “offshore” banking that’s only really offshore in name.
When you imagine offshore banking, what do you hope to accomplish or receive from opening such a bank account? In most cases, you want the funds in your offshore bank account to be highly secure. At the very least, they need to be difficult to acquire by someone from your home territory or jurisdiction.
Say you're an expert surgeon and you did a great job with a recent brain surgery. The only trouble is your patient's family is trying to sue you to recover money for medical bills, even though they knew what it would cost. That detail might not matter to the right judge.
If assets and funds are set up offshore in bank accounts and trusts, even a successful lawsuit in the above example wouldn’t be able to get those assets (or would have a much harder time doing so, at any rate). That’s because truly offshore financial instruments and vehicles operate with different laws and regulations.
What’s a Truly Offshore Bank?
So, what makes a bank account truly offshore and protective? Usually, it’s a lack of other branches in other countries.
One of the most critical things to look for when seeking out an offshore bank is proof that said bank is actually offshore. Imagine a bank that is based in Cyprus. At first glance, that might seem to be the perfect organization for your needs. But upon deeper examination, you discover that the Cyprus bank has a branch in the United Kingdom, plus a partner in Bank of America.
What does that mean for your hypothetical asset protection strategy? It means that an American interloper could potentially get into your “offshore” bank account via:
- Relationships with different banks and partners
- Conversations behind closed doors
- Other levers or levels of control since you use the bank that has institutions across multiple jurisdictions
A truly offshore bank is only in a single jurisdiction and is not subject to the laws and tax regulations of your home jurisdiction. Then, even if your home jurisdiction’s lawyers come knocking on the proverbial door of that bank, the bank has no legal reason to acquiesce to their requests.
And in many circumstances, offshore private banks that accept clients on a case-by-case basis provide the best protection and the best legal defenses against any possible threat to your estate and future finances.
Private Banking is the Ideal Means to Secure Assets
Private banking is exactly what it sounds like: banking in the private sector. “Private” in this sense means that you’ll likely never have heard of the major players that could provide offshore banking services.
Here’s a good rule of thumb: if you are currently aware of a given bank offering offshore services, it’s likely not a good option for your needs. Proper, secure, non-jurisdictional banking only takes place within closed firms that don’t get new clients by advertising on TV.
If you don’t have a legitimately private bank, you could run into a scenario where your bank has branches, representatives, or some other locus of control in different countries or jurisdictions.
Like a safe with multiple potential entry points or keys shared by multiple people, that’s far from safe. Ultimate security means there’s only one way in or, in this case, only one jurisdiction’s rules to worry about.
Indeed, a bank that has branches or representatives in multiple countries means that your home tax jurisdiction might have various methods or levers of influence over that bank. These can be legal, commercial, or even personal – you never know which judge knows which bank manager and vice versa.
That’s one of the reasons why, when Dominion looks at offshore banking for our clients, we do so incredibly cautiously. Due diligence is vital for any element of asset protection, but it’s especially crucial here. We don’t just find a decent offshore bank. We look at the fine, fine, fine print and discover the details of:
- Where the bank works (and what jurisdictions it is subject to)
- Where the bank has representatives
- Where the bank has open or previous branches
We do this because we don't want to inadvertently allow for a backdoor to our clients' assets. Any backdoor is a possible vulnerability you shouldn't have to worry about.
Opening a Private, Secure Offshore Bank Account
Opening a private bank account within an offshore jurisdiction takes more time than setting up a standard bank account, or even an offshore bank account at an international, globally recognized brand.
The secure offshore bank account will require more information about you, your financial history, and what exactly you want to get out of the relationship. With financial advisors working with you, you can answer these questions and prepare the relevant documents with a minimum of hassle or hiccups.
Important Questions When Seeking an Offshore Bank Account
As you begin the process of opening an offshore bank account at a private bank, your advisor might ask you critical questions to determine which bank is perfect for your needs. Some examples include:
- How much information do you want to divulge to the bank?
- How much do you expect in terms of fees?
- How much accessibility do you want vs. privacy, and what is the ideal balance like in your mind?
- How much observation are you comfortable with regarding incoming funds?
Similarly, you should ask your advisor for more information about the bank to determine its ultimate suitability. For instance, ask:
- What is the compliance process like?
- How many people do you need to talk to to transfer money in and out of the bank account?
- Does the bank have power over incoming funds via detailed reviews?
Gather as much information as you can. Taking all this extra time to choose the right offshore bank could mean the difference between secure assets and vulnerable assets.
Many of the Best Services Come with Time
One last note: private and secure offshore bank accounts offer a variety of premium and high-quality services to their most trusted clients. But that's the key idea: trust. Many of the services you may want to protect your assets, or even some services like trust creation, come with time and relationships.
Because of this, it’s a good idea to look into setting up an offshore bank account sooner rather than later. Establishing an early relationship with a trustworthy private bank in an offshore jurisdiction could open up additional asset protection and financial opportunities later down the road.
Say you want to set up an asset protection trust within an offshore jurisdiction. If you already have a secure bank account set up in an offshore jurisdiction with a bank you trust, setting up that next financial tool will be that much easier.
For these reasons and more, you should get in contact with Dominion today. Our experts are the best in the business when it comes to connecting high-net-worth individuals like you with the ideal service providers for their needs. More than that, we’ll provide you with the sound advice you need to maximize the effectiveness of your asset protection strategy. Contact us today.